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Credit Score

Steps to Improve Your Credit Score

by Karen Goodman on December 28, 2008

in Everything Else

Just about everyone understands that having good credit is important.

I recently posted information explaining what a credit score is and how scores are determined. The next step is to understand what to do when you need to improve your credit.

6 Ways to Improve your Credit Score:bullseye_0.jpg

  1. Pay your bills on time: Late payments and bills that go to collection agencies really hurt your credit score.
  2. Keep balances low on credit cards: High balances on your credit cards can hurt your credit score.
  3. Pay off debt rather than moving it to a new credit card: The best way to improve your score is to pay down any revolving credit rather than moving it around.
  4. Limit new credit accounts: Only apply for and open accounts if you really need them.
  5. Make sure your credit reports don’t have errors: Take advantage of your annual free credit report from each of the 3 credit reporting agencies (Equifax, Experian, Transunion). If there are any mistakes, contact the creditor and the credit agencies to get the error removed.
  6. Don’t give up if you have missed some payments: Just because you have missed some payments, you shouldn’t assume your credit can’t be salvaged. Start paying on time and get caught up on the missed payments. The longer you have been paying your bills on time, the better your score will get.

Myths About Credit Scores:

Missing a payment won’t hurt your credit score very much.

Wrong. Missing just one mortgage payment can lower your credit score up to 100 points.

Employers don’t care about credit scores.

Wong again. Many employers have started looking at additional factors such as credit scores as they try to decide if a candidate will make a good employee.

Identity theft will permanently damage your credit.

Not true. Victims of identify theft need to report it to the police and the credit reporting agencies immediately. Once it has been confirmed that you are a victim of identify theft, steps can be taken to reverse the impact on your credit score. Getting your credit cleaned up after fraudulent activity won’t be fun, but is worth the effort.

There isn’t any way to improve a credit score enough in 6 months to qualify for a mortgage.

Another myth. Depending on how low your credit score was when you started working to improve it, 6 months to 1 year of paying your bills on time and doing everything right can improve your score enough to qualify you for a mortgage.

The information for this post was provided by Stifel Bank & Trust. For more information on if you can qualify for a mortgage, or what you need to do so you can qualify to buy in the next 6-12 months, contact Kerby Claney.

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Your Credit Score Impacts More than Just your Credit Card Rates

by Karen Goodman on December 23, 2008

in Everything Else

What is a Credit Score?

A credit score is a number that represents how likely a person is to meet their financial obligations. The score is a combination of how well the consumer has paid their bills in the past plus the level of debt.

Credit scores no longer only impact how many credit card offers you will get in the mail. Read more to learn about other parts of your life that are affected by credit in addition to loans & credit cards.

How is Your Credit Score Determined?

In the last year, the criteria for ‘excellent’ credit has gotten tougher. Since credit can now impact everything from getting a job to getting the lowest available rate on a mortgage, you need to do everything you can to maximize your credit score.

pie-chart.jpgAccording to Stifel Bank & Trust, a credit score is typically determined by:

35% Payment History

  • Improves credit scores – On-time payment of bills & responsible use of credit
  • Lowers credit scores – Late payments, bankruptcies & derogatory credit

30% Amount Owed

  • Improves credit scores – Low balances on credit cards & utilizing a low percentage of credit available
  • Lowers credit scores – Maxing out credit cards & high loan-to-value ratios on mortgage

15% Length of Credit History

  • Improves credit scores – Long-term responsible use of credit & credit lines open for years
  • Lowers credit scores – No credit history & recent new credit accounts

10% New Credit

  • Improves credit scores – Shop for credit within a 30 day period & keep long-term accounts active
  • Lowers credit scores – Adding more credit cards or other revolving debt

10% Types of Credit Used

  • Improves credit scores – Stable lifestyle accounts like mortgage or auto loans & mix of credit types
  • Lowers credit scores – Non-reputable sources of credit & using credit to fund a lifestyle

You can check your credit report for free once a year to make sure that there are no errors in the reports. The reports won’t include your credit score, but for a small fee you can find out what score your financial habits have earned you.

Check back for a follow up post on how to improve your credit score.

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